Bank Accounts: Do the Free Cash Come-ons Outweigh the Fees Sure to Follow?

Major banks are offering cash incentives—$100, $200, even up to $300—to entice would-be customers into opening new accounts. But just as the banks giveth, they’re also more apt to take away in the form of new and rising fees. Oh, and when you look closely at the fine print for many of these cash reward come-ons, the banks aren’t really givething as much and as easily as it first appears.

A SmartMoney story details just how many confusing hoops a new customer much jump through to snag a sizeable cash payoff. For example:

To get the $300 at Citi, which is available through the next two weeks, you’d have to open a Citigold interest checking account (which offers a meager interest rate of 0.15%) and deposit $1,000 by Nov. 18. Then, you’ll have to maintain an average daily balance of $1,000 through the end of the month. You’ll also have to sign up for three more Citi products — like a savings account, certificate of deposit or a credit card —within two months of opening the account. And when you finally get the money, expect a bill come tax time. All of these cash bonuses (like other promotions) will be taxed as regular income. If you’re in the 25% tax bracket, that $300 award will drop to $225.

Cash-back awards obviously drop further (or become nonexistent) if you’re paying monthly maintenance fees, most often related to not meeting minimum balance requirements. And, since minimum balance requirements and associated fees are both on the rise, it’s increasingly likely that customers will be hit paying more, and more often, for services they used to get for free. A recently released BankRate.com study showed that 65% of checking accounts don’t have minimum balance requirements today, down from 76% a year ago, and that the minimum average balance required for a non-interest checking account is up 228% from two years ago.

The SmartMoney story notes that Bank of America’s regular checking accounts incur a $12 monthly fee if a minimum daily balance of $750 isn’t met—and that as of today, November 4, the fee goes up to $14 monthly if the account’s balance dips below $1,500. Other fees growing in popularity include requirements to use one’s debit card a certain number of times per month. Some Chase customers, for example, pay $6 a month if they fail to use direct deposit or to use their debit card five times a month.

The Boston Globe, meanwhile, reports that starting next month, many Citizens Bank account holders who previously enjoyed free checking will have to pay $5 a month (OK, actually $4.99) unless they either maintain balances of at least $1,500 or they make five or more payments or ATM withdrawals each month. The bank is also upping the fee for using non-partner ATM machines ($3, up from $2), and anyone who wants to receive a paper statement in the mail—formerly a free service—will have to pay $2 a month, and $5 a month if they want to see copies of written checks in the statement.